Flashcards in MF Week 6 Price Deck (32):
Price is a measure of ............ for buyers and sellers.
Profit formula =
Profit = (price x sales volume) ‐ total costs
satisfaction from owning or consuming a product
Return on investment (ROI):
The profit required to justify investment in a particular product or project.
Pricing objectives tend to focus on various
combinations of the following issues: (5)
• long‐term prosperity
• market share
• what the customer is prepared to pay
Price Elasticity of Demand is the:
sensitivity of quantity demanded to price changes
A minimum price that must be charged to cover costs.
A high‐volume product priced near cost to attract customers into the store, where it is expected they will buy other, normally priced, products.
A high‐volume product priced below cost to attract customers into the store, where it is expected they will buy other, normally priced, products.
The difference between the price and the variable cost per unit.
Economies of scale:
As the amount of units produced increases, the cost to produce each unit decreases.
Low‐cost production often based on:
country of origin
In developed economies, long‐term price competition can create ............... .
Organisations differentiate by ..................... .
Product attributes may include: (4)
External reference price:
A price comparison provided by the manufacturer or retailer.
tactic based on setting a low price in order to gain rapid market share and turnover for a new product
Charging the highest price that customers who most desire the product are willing to pay, and then lowering the price to bring in larger numbers of buyers.
charging different buyers different prices for the same product
Price laws protect against practices such as: (4)
Resale price maintenance
Selling below cost for an extended period
Different prices to different customers
The management of price is known as:
Captive pricing involves offering a ......... entry price for a basic product, then .................................................. .
low, charging more for desirable additional parts or functions
Formally defined, demand is the relationship between:
the price of a particular product and the quantity of the product that consumers are willing to buy.
The typical demand curve is ............... sloping. ............... products are an exception.
The sensitivity of the quantity demanded to changes in price is known as the:
price elasticity of demand
A price elastic demand curve is relatively .............. .
The cost mix includes: (2)
- fixed costs, which do not vary with changes in output
- variable costs, which do vary with changes in output
Average cost formula =
Average cost = total cost / volume of production
Average revenue formula =
Average revenue = total revenue / unit sales volume